The Trader Daily

Bond bears will be happy to know that cracks are finally beginning to appear in that instrument's five-to-six-month uptrend. I don't see any reason to assume investors are going to fire-sale their bonds, but a move through 3.5% on the 30-Yr Treasury yield should be enough to trigger a short-term squeeze toward 3.65%-3.75%.

The TLT took a beating on Thursday. And while my gut says a bearish posture is now appropriate, I remain hesitant to slide fully into the bear camp until the 30-Yr yield is closing above 3.5%. In any event, if one were to initiate a short on the TLT near current levels ($110.96), I'd be hesitant to remain short upon any close above $112.5-$113.

Given how strong the bond market has been, and how much heartache has been endured by those hell-bent on catching the turn in that market, my own plan will likely have me missing the initial down move, and stalking more aggressive the secondary one. With low volume rejection located between $109.25 and $109.60 on the TLT, any decline from current levels would likely attract buyers within that $0.35 zone. Should I miss a short from current levels, I will likely stalk a bounce from that $0.35 zone for a short.

The SPY spent the bulk of Thursday's session more thoroughly auctioning the upper end of Wednesday's intraday range. Put another way, the volume profile (below) allows us to see more clearly that prices have now been unequivocally accepted between $196 and $196.50. Based on Thursday's successful test of $197.80 (we made it within $0.10 of that level), and the new all-time record close, day timeframe traders are expected to enter Friday's session with a bullish bias.

Thursday's profile, while not perfectly symmetrical, provided a sufficiently obvious unfair high and low to label the session's auction as complete. As such, we'll enter the day expecting buyers to be active on dips, but not quite so aggressive on upside breaks.

Using $196.25 as our intraday pivot, all trading above that level is expected to find buyers bidding prices through Thursday's regular session intraday high ($196.60), and on to new all-time record highs. All trading below $196.25, while not particularly bearish, does provide sellers an opportunity to sell the SPY back down toward $195.80 -- $195.70.

Please keep in mind that a complete collapse beneath $195.70, along with a session close beneath that level, will be needed before considering whether or not the recent advance should be labeled as near-term bullish excess. Despite a number of increasingly concerning cross-currents (such as sentiment indicators and powerfully strong defensive sectors), the current price action can only be classified as bullish.